Ryan’s Soft Attack on Farm Subsidies

April 6th, 2011 at 1:17 pm | 11 Comments |

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Paul Ryan’s budget resolution calls for slicing farm subsidies by $30 billion over the next decade.

Two cheers for good intentions. But is $30 billion the best that Ryan can do?

No, it’s not. In 2007, Ryan co-sponsored sweeping, bipartisan farm reform legislation that would have saved an estimated $55 billion over 10 years. When elements of the legislation were proposed as an amendment to the most recent farm bill, the outcome was predictable – the amendment was crushed in a lopsided, bipartisan vote by lawmakers determined to keep the farm subsidies gravy train chugging forward even as it inflates land prices, encourages overproduction on marginal land, and distorts trade.

Farm subsidies also enrich corporate farmland owners – along with a few Tea Party freshmen in Congress. Ten percent of farm subsidy recipients collect three-fourths of the dough.

Ryan’s resolution takes aim at fixed payments that are made regardless of crop prices and at the federal government’s single-payer crop insurance program.

There is plenty more to work with down on the farm, however, if Ryan really wants to wrestle the deficit beast to the ground. Farm subsidies are a thicket – impenetrable to all but policy aficionados – of commodity payments, crop loans, crop insurance, disaster payments, marketing assistance, and other boodle that in 2009 totaled more than $16.3 billion, according to the Environmental Working Group’s farm subsidies database, a mother lode for nosy fiscal voyeurs. Between 1995 and 2009, the total payout was a shade under a quarter trillion dollars.

Ryan said his proposed blueprint is not a budget, but a “cause.” Well, here’s a cause for him to embrace – a full-tilt campaign to reform the Rube Goldberg farm subsidy system from top to bottom.

And Congress shouldn’t put off reform in order to “maintain flexibility for the Agriculture Committee,” as Ryan’s resolution said. You “maintain flexibility” for that pork barrel committee and you can kiss farm policy reform goodbye. The committee is a stacked deck for the status quo. In 2009, nearly $3.1 billion in ag subsidies – almost one-fifth of the national total – were paid out to the districts of the committee’s 46 current members. The districts of Chairman Frank Lucas (R-OK) and ranking member Collin Peterson (D-MN) alone collected $390 million.

Just so you know, Ryan isn’t on the ag committee, but his district received $15.7 million in ’09.

A good framework for reform would be the 2007 bill, which would have provided IRA-like risk management accounts that would have given all farmers a safety net, not just those who grow corn and other favored crops. It would have cut off subsidies to any commercial farm with adjusted gross income exceeding $250,000 – a sensible cap that Ryan supported at the time. It would have redirected some of the savings to conservation programs popular with farmers.

One egregious subsidy it would have begun winding down is the “direct payments” program, which sends checks to owners of land that happened to have been farmed 25 years ago. The payments are made regardless of what the landowners grow, regardless of how much they earn from selling what they grow, and regardless of whether they grow anything at all. In 2009, direct payments cost more than $4.7 billion. Since 2002, direct payments have cost the taxpayers nearly $37.6 billion.

Another subsidy on the chopping block in the 2007 bill was “loan deficiency payments,” which are as bad as anything in the Tea Party fever swamp of fiscal horror stories. Farmers who grow eligible crops can collect the payments when market prices are below a mandated target price. Farmers, however, don’t have to sell at the support price. They can take the loan deficiency payments, wait for prices to go up, and then sell. Between 1995 and 2009, loan deficiency payments cost more than $30.5 billion.

For Ryan to have mentioned farm subsidies at all is progress of sorts. Congressional Republicans typically boil over with indignation when the topic is subsidies for things they consider politically incorrect, such as renewable energy. When it comes to farm subsidies, however, they find rationalizations (as they do for oil subsidies) for perpetuating wasteful government spending that would embarrass Nancy Pelosi.

Ryan has put the farm subsidies reform ball into play, sort of. Let’s see how aggressively he pushes it when he hears the inevitable excuses for doing nothing.

Recent Posts by Jim DiPeso

11 Comments so far ↓

  • Chester

    Get rid of all farm subsidies and stop funding anything to do with ethanol. If the Midwesterners (Democrats and Republicans) want to cut transportation funds that hurt city-dwellers like me, then they should be willing to make similar sacrifices.

  • cporet

    As David said in his piece, farmers vote republican. Sharing the pain of cuts in farm subsidies is not in the works this year.

    • politicalfan

      Oh but it will if a Republican candidate is elected President in 2012. Unless, they keep the Congress and take the Senate.

  • valkayec

    Taken from the 2010 Green Scissors report:

    To get our nation’s spending in check, tough choices will need to be made in many areas, including
    energy and natural resources. The good news is there are plenty of cuts and reforms that will benefit both the environment and the country’s bottom line. We need to eliminate wasteful programs and policies – they not only cost us upfront, but create additional financial liabilities down the road and threaten our nation’s fragile land, air and water.

    From the more than a century-old 1872 Mining Law that gives away federal land at $5 an acre, to $53 billion in lost oil and gas revenues from royalty-free leases given away in the late 1990s, to the $5.4 billion per year ethanol tax credit; there are dozens of reforms that can bring in hundreds of billions in valuable taxpayer revenue while helping to address our nation’s top environmental priorities.

    To read the entire report about more than $200 billion annual federal giveaways to corporate America, go to: http://www.greenscissors.com/

  • COProgressive

    Yeah, what Chester said…..

    To find out who the farm welfare queens are in your state go to http://farm.ewg.org/

  • Gray Area

    It’s unconscionable that the far-left Obama administration continues, year after year, to hand out billions and billions of dollars in agricultural subsides, when the United States of America is in such dire financial straits.

    Handing out all of these billions and billion of dollars in agricultural subsides clearly violates the Tea Party’s clearly stated principles of government fiscal responsibility, constitutionally limited government (Show me where in The Constitution of the United States the founding fathers gave the President the authority to issue agricultural subsidies! This is, quite clearly, an impeachable offense!), and government interference in free market economies.

    I, for one, think this situation is intolerable, unsustainable, and should brought to the attention of the Tea Party immediately. IMMEDIATELY, I say!

    You can be sure that something will be done about this welfare program, that has been foisted on the American taxpayer by big government, when it’s brought to the Tea Party’s attention! Just you wait and see!

    • valkayec

      You’re being facetious, right?

      • Gray Area

        I was kind of shooting for ‘hypocritical’, to match the Tea Party’s typical rhetoric. But, you’re right, I overshot the mark and hit ‘facetious’ instead.

        Seriously, however, I applaud Mr. DiPeso for writing this article. I was amazed to find that he is ‘Vice-President for Communications of Republicans for Environmental Protection’. Until today, I didn’t know such an organization existed.

        I’m disappointed to see that out of the vast number of ‘journalists’ giving the Tea Party movement free venues for their simplistic views, very few of those ‘journalists’ have pointed out the glaring hypocrisy of how the Tea Party’s overwhelming support for agricultural subsides clashes with their stated core values. (BTW, those core values are posted on the following web page: http://www.teapartypatriots.org/mission.aspx )

        I’m also disappointed to see that the Democratic Party is too obtuse to expose the Tea Party’s hypocrisy on this issue and use it in their negotiations. I mean, can you imagine what would happen if the Democrats threw ‘agricultural subsidies’ out there as a major budget cutting item? The Tea Party wouldn’t know whether to ____ or go blind!

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  • mmelius

    Is it time to declare federal farm subsidies a success and begin phasing them out?

    The first part of the question will be met with skepticism by those who won’t admit the possibility of a government program’s working, on principle, and by those who don’t want to see farm payments end.

    Direct payments and other price support programs go back over 30 years, to the days of perennial crop surpluses and attendant low prices. In the rare times when prices did go up, it was probably due to drought or other crop failures, so farmers never had much crop to sell anyway.

    This boom-or–bust, biologic nature of farming, along with the real social need for a domestic food supply–it’s not something you want to outsource–combine to make a strong argument for having some kind of farm program, some safety net to keep farmers farming through thick and thin.

    Each individual farmer has little choice but to go all out every year, at the risk of failure, knowing that success may be rewarded with low crop prices at harvest. Knowing this vicious cycle firsthand, I was always one to defend farmers from detractors, usually non-farmers who didn’t know much of what they were talking about.

    Times have changed. For example, 30 years ago farmers were urged to create “value-added” products from the grains they grow, to increase their income from each bushel grown. They’ve done that in a big way. It’s called ethanol.

    Ethanol has helped the perennial surplus disappear, while keeping a floor under corn prices. Increased corn production to meet the demand has meant less acreage for wheat and other grains. Smaller harvests for these crops boosts their prices.

    Prices for most cereal grains have been at historically high prices for three years now. World population and economic growth have caught up with production; surpluses and low prices may finally be a thing of the past.

    In response to the high grain prices, farmers are seeking more land to grow crops. Efforts to conserve land as forest, prairie or wetland are under pressure by farmers looking to increase acreage. There’s just too much money to be made with cropland versus conservation uses.

    Does an expanding industry really need continued subsidies?

    Higher crop prices translate into higher retail prices. Is it fair to ask Americans to maintain direct payments to farmers while shelling out more for groceries?

    Federal farm programs tie American consumers to farmers even when the market connection is indirect. The debate on the farm bill, due for renewal by Congress in 2012, gives us all a say in what kind of agriculture we want to support in this country.

    The direct payments I’ve been referring to are just that–money that’s direct-deposited in the bank account of a farm operator who participates in the farm program. The payment amounts are calculated based on acreages established years ago, and were originally tied to particular crops. That made sense when prices were low: farmers had the incentive to grow needed grains. Now farmers have the flexibility to grow many eligible crops, and payments are made even if the land is fallowed, although that practice is becoming rare in this new age of moisture-conserving minimum-tillage agriculture.

    Ending direct payments is not the same as imposing a new tax or ending a tax break. Direct payments are old, but it’s not like they’re in the Constitution. They are wealth transfers, and they were never meant to be permanent.

    (A work in progress.)

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